From
Mark Dempsey
Title
Resolution authorizing the City Manager to execute a Professional Service Agreement with the Texas Coalition for Affordable Power ("TCAP") and a Commercial Electric Service Agreement with Gexa Energy, and providing an effective date
Presenter
Mark Dempsey - Deputy City Attorney
Recommended Action
Approve
Analysis
The City is a member of the Texas Coalition for Affordable Power (TCAP), which is made up of over 160 Texas cities that aggregate their electric power needs in order to use the increased size of their requirements to obtain better pricing from suppliers for its members. The City is currently in the third year of a five-year fixed price contract for its electric power. The contract expires on December 31, 2022.
TCAP has traditionally gone to the market and negotiated with power suppliers to get the best deal possible for its members, after which each individual city has signed the same power supply contract with the supplier for a fixed number of years. However, TCAP itself has not actually made any power purchases on behalf of the member cities. It has merely arranged the deal.
While TCAP will continue to provide an option for a fixed price contract, it is proposing a new approach to purchasing power on behalf of cities after the current contract expires that it believes will provide lower rates to its members. If the City elects to participate, it will need to sign a professional services agreement with TCAP that actually gives it the authority to make power purchases for the City. It will also require the City to execute a Commercial Electric Services Agreement with the power supplier - Gexa Energy.
TCAP refers to the new purchasing approach as the Strategic Hedging Program ("SHP"), under which it will buy future supplies on or near a monthly basis, thereby eliminating the risk premiums suppliers add to long term fixed rate electric contracts to account for future market uncertainty. In short, the risk premium acts as insurance for the supplier against the possibility that its costs increase in the future - and the members cities pay that premium which is rolled into the fixed rate for the term of the contract. TCAP's management, consultants, and legal advisors believe that money can be saved by getting away from long-term fixed price contracts and using a short-term market driven auction process.
In order to make purchases for the member cities under the Strategic Hedging Program, cities must grant TCAP the authority to do so. That authority is supplied through the Professional Services Agreement if approved by Council. In addition, a Commercial Electric Services Agreement with the City's retail electric provider, Gexa, is necessary because Texas law requires a retail purchaser to purchase from a retail electric provider. Those are the documents which are the subject matter of this agenda item.
A significant feature of the SHP is that the City has the option, twice a year, to terminate participation in SHP and convert to a fixed price contract. If it appears that the market is destabilizing and SHP is no longer a viable approach, TCAP will advise participating member cities well in advance to allow cities to return to a fixed price contract.
Financial Consideration
NA
Body
RESOLUTION OF THE CITY OF GRAND PRAIRIE TEXAS AUTHORIZING THE CITY MANAGER TO EXECUTE A PROFESSIONAL SERVICES AGREEMENT WITH the TEXAS COALITION FOR AFFORDABLE POWER ("TCAP") AND A COMMERCIAL ELECTRIC SERVICES AGREEMENT WITH GEXA ENERGY FOR POWER TO BE PROVIDED ON AND AFTER JANUARY 1, 2023, AND PROVIDING AN EFFECTIVE DATE.
WHEREAS, the City of Grand Prairie is a member of Texas Coalition For Affordable Power, Inc. (“TCAP”), a non-profit, political subdivision corporation of the State of Texas; and
WHEREAS, TCAP has previously arranged for the City to purchase power through Gexa Energy with a contract set to expire December 31, 2022; and
WHEREAS, TCAP has designed a new procurement strategy that will involve TCAP initially committing to purchase power two years in advance of delivery on behalf of its members who desire participation in a Strategic Hedging Program (“SHP”) that will involve a series of monthly competitive auctions; and
WHEREAS, the Professional Services Agreement (“PSA”) with TCAP will specify the services and benefits to members of TCAP and provide TCAP with specific authority to procure power in the wholesale market on behalf of members who choose to participate in the SHP; and
WHEREAS, approval of the PSA is a necessary, but not sufficient, prerequisite to participation in the SHP; and
WHEREAS, the PSA is a relational contract that defines services provided by TCAP to members regardless of whether a member decides to commit to the SHP; and
WHEREAS, the industry-standard retail contract is a Commercial Electric Service Agreement (“CESA”) offered by a Retail Electric Provider (“REP”); and
WHEREAS, TCAP has negotiated modifications to the current CESA between the City and Gexa Energy to reflect participation in the SHP; and
WHEREAS, the CESA that will facilitate participation in the SHP effective for power deliveries in and beyond 2023 will need to be approved and signed prior to October 1, 2020; and
WHEREAS, the City desires to participate in the SHP.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF GRAND PRAIRIE, TEXAS:
SECTION 1. That the City Manager is authorized to execute a Professional Services Agreement with TCAP and a Commercial Electric Services Agreement with Gexa Energy, and send the agreements to TCAP, 15455 Dallas Parkway, Ste 600, Addison, TX 75001.
PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF GRAND PRAIRIE, TEXAS, SEPTEMBER 15, 2020.